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Tesla wants approval for its full self driving software, China wants fewer tariffs

Donald Trump’s election could put Tesla CEO Elon Musk in a tough spot, caught between his support for the president-elect and Trump’s tough stance toward China, Tesla’s second-biggest market. But Musk could instead thrive by proving a valuable bridge between Trump and Chinese leader Xi Jinping.

Here’s why: Tesla’s electric vehicle sales in China have slipped over the past year even as EVs and plug-in hybrids have soared to more than half of new car sales in the country. Tesla’s problem: Its models are outdated and outstripped by zippy, tech-filled competition from Chinese rivals like Byd and Nio.

To get back on track, Tesla desperately needs to update its cars—specifically, equip them with autonomous-driving software, an increasingly decisive feature of EVs in the brutally competitive Chinese market. But to do so, it needs a permit, for which it’s still waiting despite a tentative green light from the country’s second-most-powerful official.

Some analysts think Trump’s victory Tuesday could give Musk leverage with Chinese officials—and accelerate approval of Tesla’s self-driving permit. But Xi may ask for something in return, such as persuading Trump to go easy on new tariffs or to scrap an effective U.S. ban on sales of Chinese EVs.

For Musk, the permit allowing Teslas equipped with Full Self Driving software is an urgent priority. Tesla had no real rivals for its prior product launches in China. Now it has fallen behind.

Multiple Chinese companies—from EV makers to tech giants to developers of self-driving software—are already using partial or full autonomous driving technology on urban roads. EV makers XPeng, Nio and Li Auto developed and operate advanced driver assistance systems, similar to Tesla’s FSD, which require drivers to keep their eyes on the road and hands on the wheel. Baidu, Momenta, Pony.ai and WeRide operate pilot robotaxi programs in several Chinese cities, using driverless software.

The main battleground in China is for ADAS in mainstream vehicles. Without it, you increasingly can’t compete: More than half of new cars sold in China last year included ADAS, according to Canalys, an industry research firm.

“China is by far the biggest potential market for advanced driver assistance systems. And it’s also the most competitive market,” said Gerhard Steiger, chair of Momenta’s European unit. “We strongly believe that nearly all new cars in China will eventually be equipped with higher levels of driver assistance systems as the cost of mass production comes down.”

If Musk serves as a go-between in U.S.-China relations, it won’t be the first time. In April 2018, during Trump’s first term as president, he imposed a 25% tariff on $50 billion of Chinese imports; China matched the tariffs in retaliation. For the next year, the two countries imposed new tariffs on each other.

Amid the tit-for-tat exchange, the Chinese government granted Tesla permission to make cars in the country without a local partner—the first foreign automaker it allowed to operate alone. The Shanghai government backed the plant with a 50-year land lease, a low-interest $520 million loan and low income taxes for four years.

Xi had multiple reasons to grant Tesla permission. For one, he wanted to light a fire under Chinese automakers, who he hoped would respond to Tesla’s advanced technology and style with competing models.

But it also was a bit of car diplomacy: In June 2019, Trump—meeting face to face with Xi—agreed to impose no new tariffs and Xi said China would buy an unspecified amount of U.S. farm products.

Xi’s move had its intended impact on China’s EV companies: Over the next six years, scores of them launched into a brutal competition to stand out. Byd emerged as China’s leading carmaker, producing dozens of models of EVs and plug-in hybrids. In October, it sold more than 500,000 units in a month for the first time. In the third quarter, Byd’s quarterly revenue surpassed Tesla’s for the first time, too, reaching $28.2 billion, compared with Tesla’s $25.2 billion.

Tesla’s China sales are falling—3% in the first 10 months of 2024. Byd, meanwhile, has already exceeded its 2023 sales and is on track to sell 33% more cars this year than last.

Tesla’s self-driving problems stem in part from China’s security restrictions. Last year, Chinese authorities banned Teslas from some government office areas, military zones and airports. But there also was the matter that, next to Chinese models, Tesla’s EVs started to look outmoded.

In April, Musk made a surprise two-day trip to Beijing to try to lift the effective block on using FSD. In a meeting with China’s premier, Li Qiang, he got preliminary permission to use FSD in a limited pilot program in Shanghai. Musk asked for permission to bring a small fleet of Tesla’s prototype Robotaxis to Shanghai, but it’s not clear whether Li approved that or just the use of FSD in Tesla Models 3 and Y plying Shanghai roads. As a bonus, in a separate meeting, Musk sealed a deal with Chinese tech giant Baidu to use the group’s mapping and navigation systems, considered the best in the country. Musk did not respond to an email.

In June, Tesla said it had received final approval to start the FSD road test, but it is still held up. In a tweet in September, Tesla said it expected to have FSD in its cars on Chinese roads in the first quarter of next year; it wasn’t clear whether the company meant the pilot or cars for customers.

Meanwhile, Tesla’s biggest EV competitors in China, such as Byd and Nio, are equipping their vehicles with ADAS, in addition to driverless pilot programs, while software providers like Momenta are supplying their ADAS to more carmakers.

The question is whether Trump’s election will help Tesla: Analysts expect Musk’s relationship with Trump to smooth over issues like the stuck FSD permit. Chinese authorities, already friendly to Musk, could become even more so now. Musk may also engage in some diplomatic horse trading, using his closeness to Trump.

But Xi, regarded as a sophisticated negotiator by U.S. experts who have dealt with him, could seek to take advantage of Musk’s desire for FSD approval to gain leverage with Trump. One big potential ask is to lift an effective U.S. ban on Chinese EVs, imposed by President Joe Biden.

Trump might be open to that: In recent months, he has repeatedly invited Byd to build its cars in the U.S. He threatened 200% tariffs if it builds them in Mexico and attempts to export them into the U.S. tariff-free under the U.S.-Mexico-Canada Agreement.

Bill Russo, China-based founder of Automobility and Chrysler’s former head in the region, said he expects such diplomacy to take place but is skeptical that Musk will get a large share of the market for autonomous Chinese EVs. “Tesla’s going to get a lane, but it’s going to be a thin lane,” he said. “Fully self-driving vehicles deployed at scale in China—good luck with that.”

Tu Le, managing director of Sino Auto Insights, said he saw more room for give and take between Musk, Xi and Trump. For China, Tesla continues to be a prod to local carmakers to produce EVs with global appeal. Tesla also is the only automaker in China apart from Byd that produces EVs at large scale, helping make China the world leader in EV technology.

“Tesla needs China and China needs Tesla for the foreseeable future,” Le said. “The economy isn’t great. The Chinese government can use Tesla as an example of ‘Look at a successful foreign company doing business here.’”

The transaction is contingent on an earlier deal with T-Mobile.

U.S. Cellular agreed to sell a portion of its retained spectrum licenses to AT&T T 1.22%increase; green up pointing triangle for a consideration of $1.02 billion.

Chicago-based U.S. Cellular, which caters mostly to rural customers across several states, said the purchase price is payable in cash. It noted that substantially all of the transaction is contingent on an earlier deal with T-Mobile.

“As with the other mobile network operators, we are confident that AT&T can put it to productive use in communities throughout the U.S.,” U.S. Cellular Chief Executive Laurent Therivel said.

T-Mobile US in May agreed to buy much of U.S. Cellular’s operations in a roughly $4.4 billion deal. The agreement, which includes up to $2 billion of assumed debt, would give T-Mobile more than four million new customers and a trove of valuable spectrum rights to carry more of their data over the air. The companies said they expect the deal to close in mid-2025.

U.S. Cellular said that, including the proposed deal with T-Mobile, it will have reached agreements to monetize about 70% of its total spectrum holdings.

Shares of U.S. Cellular rose 4% to $67.77 in premarket trading.

Engineering company says the evaluation was prompted by ‘dialogue’ with its auditor

John Wood Group shares fell more than 50 per cent on Thursday as the UK energy engineering company announced an independent review of one of its core divisions following multimillion dollar write-offs this year.

Shares in the London-listed group, a subject of two failed takeover bids in the past 18 months, fell after it said had agreed to a review of its projects division “in response to dialogue with its auditor”. The division designs and procures for large engineering projects in sectors such as energy and mineral processing

Aberdeen-based Wood said the evaluation, to be undertaken by Deloitte, would include looking at governance and determining if there was a need for previously reported information to be restated.

It is a blow for Wood and chief executive Ken Gilmartin, who is under pressure to prove the company can implement a turnaround plan and succeed as an independent entity after a turbulent period.

Wood announced write-offs of almost $1bn in August after deciding to exit certain types of work and recognise costs related to legacy acquisitions, pushing the company into an operating loss of $899mn in the six months to June.

“This review will focus on reported positions on contracts in projects, accounting, governance and controls, including whether any prior year restatement may be required,” Wood said. “An update will be provided as appropriate following its conclusion.”

Wood, which employs about 35,000 on engineering and consulting projects across the world, has been struggling to turn its fortunes around after a £2.2bn takeover of Amec Foster Wheeler in 2017 saddled it with high debts and legal liabilities.

Earlier this year, the company was repeatedly pursued by Sidara, known as Dar Al-Handasah, in a bid that valued it at about £1.6bn. Dubai-based Sidara walked away in August, citing “geopolitical risks and financial uncertainty”.

It was the second potential deal for Wood to collapse in just over a year. Private equity company Apollo Global decided in May 2023 against concluding a 240p-a-share bid that valued Wood at about £2.2bn at the time, including debt. Wood is now worth about £431mn after Thursday’s decline.

The company has also come under pressure from some investors to move its listing from London, but Gilmartin rejected that and told the Financial Times in August that such a move would not solve the company’s problems.

In Thursday’s trading update, Gilmartin said Wood had a “mixed quarter” in the three months to September despite strong growth in its operations division, which maintains and manages projects.

The projects division had a disappointing quarter after it was “impacted by delayed awards in our chemicals business and our continued weakness in minerals and life sciences”, he said. 

Group revenue for the first nine months of the year fell about 3 per cent to $4.3bn, and the company reiterated a full-year guidance of “high single-digit growth”. 

Analysts at Citi said the trading update was “below market expectations” and they “would like to see improved operational delivery”. 

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